Slowdown in car sales raised concerns in auto industry
MUMBAI: Maruti Suzuki India Ltd (MSIL), the country’s leading carmaker, is adjusting its production levels to manage dealer inventories, following weaker-than-anticipated demand for passenger vehicles in the first quarter of the 2024-25 fiscal year.
This update was provided by Suzuki Motor Corporation (SMC), the majority shareholder of MSIL.
“We are currently adjusting production to reduce market stock and are closely monitoring demand trends. India will be in a critical period with the upcoming festival season, so we will closely monitor demand trends,” SMC stated during an August 6 conference call with analysts.
The slowdown in car sales has raised concerns within the Indian auto industry, as dealer inventories have swelled to concerning levels.
The Federation of Automobile Dealers Associations (FADA) has reportedly sent two letters to the Society of Indian Automobile Manufacturers (SIAM) in recent months, highlighting the issue.
730,000 unsold vehicles
FADA estimates that its members are holding approximately 730,000 unsold vehicles—enough to cover over two months of sales.
In contrast, SIAM estimates the inventory level to be closer to 400,000 units.
“The Indian market typically sees slower demand in the first quarter compared to the rest of the year, but this year, demand has been slower than expected, particularly due to the Lok Sabha elections and adverse weather conditions, including heavy rain and heat waves,” SMC told analysts.
“As inventories have increased, we are making adjustments… This year, the festival season starts in late August, a bit earlier than last year, and higher demand during this period will significantly impact overall sales volume.”
Output up by 7.4%
In the first quarter of 2024-25, Maruti Suzuki’s production increased by 7.4 per cent year-on-year to 496,000 units, while sales grew by just 1.2 per cent year-on-year to 427,000 units. MSIL maintains a 40% share of the Indian car market.
Despite the current challenges, SIAM’s full-year growth forecast for the industry remains at 2-3 per cent above last year’s figures.
SMC indicated that they plan to boost production in the second half of the financial year, aligning with initial targets and considering government measures.
SMC also noted an improvement in retail sales in July compared to the April-June period, with a 3 per cent year-on-year increase in retail sales from April through July.
Stimulating demand
However, they acknowledged that inventory adjustments are still necessary, with a focus on stimulating demand during the upcoming festival season, which runs from late August to Diwali in late October.
For the first quarter of 2024-25, SMC reported $3.86 billion in revenue from its Indian car sales, representing 42.7 per cent of its global revenue of $9.04 billion.
The company’s net profit surged by 56 per cent year-on-year to $0.78 billion, largely driven by strong performance in Japan and Europe.
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